DEPARTMENT OF FORESTRY

(1) The purpose of these rules is to provide a uniform procedure governing defaults on Board of Forestry timber sale contracts involving Board of Forestry lands or lands managed under agreement with the State Land Board.

(2) The provisions of OAR 629-032-0000 to OAR 629-032-0070 are in addition to, not in lieu of, any other remedies the Board of Forestry may have against a defaulting purchaser.

(1) "Contract" means a contract for the sale of timber made under the provisions of ORS 530.050 and 530.059 or under agreement with the State Land Board.

(2) "Default" means the purchaser's failure to correct a violation as directed by the forester within a specified period of time; purchaser's failure to complete contract requirements by any interim completion dates or the contract expiration date, whichever is earliest, or the purchaser's injury to or severance of timber not included in the sale.

(3) "Forester" means the State Forester or designee.

(4) "Purchaser" means individual or organization purchasing timber from Board of Forestry lands or lands managed under agreement with the State Land Board.

(5) "Violation" means any failure to comply with the terms and conditions of the contract.

(1) The provisions of OAR 629-032-0000 to 629-032-0070 are in addition to, not in lieu of, any other remedies the Board of Forestry may have against a defaulting purchaser.

(2) Except where the purchaser posts security as provided in OAR 629-032-0040, or except as may be otherwise provided in these rules, any purchaser of timber from Board of Forestry lands who defaults on a contract with the forester shall not thereafter be allowed to bid on any Board of Forestry timber sale including the resale of the defaulted contract, until purchaser reimburses State for all damages and expenses incurred as a result of the default. This prohibition shall apply to the purchaser's assignee, agent or anyone else acting in the purchaser's behalf.

(3) In the case of a contract for the sale of timber which includes both Board of Forestry lands and other state lands managed by the forester, this rule shall apply only if the timber on the Board of Forestry lands predominates in value.

(1) Whenever the forester finds there is a violation of any provision of the contract, the forester may suspend operations in accordance with the provisions of the contract. If the violation is not corrected within the time specified by the forester, the forester may notify the purchaser that the contract is in default and terminate the contract.

(2) If the purchaser has failed to complete the requirements of the contract prior to the expiration date or any interim completion date required by the contract, whichever is earliest, or if the purchaser injures or severs timber not included in the sale, the forester may notify the purchaser that the contract is in default without allowing the purchaser to take corrective action.

(3) All notices of default to the purchaser shall:

(a) Be sent by certified mail with return receipt requested;

(b) Inform the purchaser of the reasons for the default and the effective date of the default.

(c) Inform the purchaser that the purchaser may request a contested case hearing by notifying the forester within 15 days of the date of the Notice of Default.

(1) If a purchaser in default wishes to bid on the resale of the defaulted contract and future contracts, the purchaser shall so notify the forester in writing within 30 days of receiving the notice of default. The forester shall, within 30 days of the receipt of the notice, notify the purchaser of the estimated damages and expenses incurred by the State as a result of the default, using the method set out in OAR 629-032-0060.

(2) The forester shall notify the purchaser of the estimated amount of damages and expenses by certified mail. The notice of estimated damages and expenses shall inform the purchaser of the right to request a contested case hearing pursuant to OAR 629-032-0050 and the time within which such request must be made.

(3) If purchaser makes payment of the estimated damages and expenses prior to the resale of the defaulted contract, the forester shall grant permission to the purchaser to bid on the resale and future sales.

(4) The forester shall not give permission to bid on the resale of the defaulted sale or future sales if other defaults by the purchaser are outstanding.

(5) If the purchaser is in the process of settling the defaulted contract with the forester under the provisions of OAR 629-032-0060, the purchaser may bid on contracts other than the defaulted contract if the purchaser posts a bond in the amount sufficient to cover the estimated damages and expenses determined by the forester, or places in an escrow account cash or marketable securities acceptable to the forester that are readily convertible into cash in an amount sufficient to cover the estimated damages and expenses of the defaulted contract, or a combination of such bond, cash and securities in the required amount. The terms of the escrow agreement shall be satisfactory to the forester. The forester shall grant permission to bid on other contracts under this provision only if no other defaults by purchaser are outstanding.

(1) Within 15 days of the date of the Notice of Default from the forester stating the reason for the default and effective date of the default, the purchaser may request a contested case hearing before the forester to determine whether a default was committed by the purchaser. The hearing, if requested, is the purchaser's opportunity to prove that it did not commit a default. Within 60 days of submitting a request for hearing, the purchaser must submit to the forester a detailed and comprehensive written statement explaining why the purchaser believes it did not commit a default. The statement must be accompanied by copies of all documentary and other evidence that the purchaser will rely on at the hearing to establish that it did not commit a default. Only those grounds identified in the purchaser's statement, and supported by the evidence accompanying the statement, may be relied on by the purchaser at the hearing to prove that the purchaser did not commit a default.

(2) The hearing shall be governed by ORS 183.413 to 183.497. A hearings officer may be appointed by the forester to hear the case. However, the hearings officer shall not have the authority to issue a final order. Any final order issued under this rule shall be signed by the forester and may be appealed as provided in ORS 183.482.

(1) In the event of default, the forester may terminate the contract and assess damages and expenses using the formula; D = (OSV+AC)-(PR+RSV), where:

(a) D = Damages and Expenses;

(b) OSV = Original Sale Value (timber value only -- does not include project value). The original sale value shall be adjusted to reflect estimated overruns or underruns on recovery sales;

(c) AC = Administrative Costs. These costs include both the field and office costs required for the preparation of the defaulted parcel for resale. These costs also include rehabilitation or regeneration delay costs, legal service costs, interest, and other costs allowed by law;

(d) PR = Payments Received;

(e) RSV = Remaining Sale Value. Dependent upon when settlement is made, the value of the remaining timber shall be determined by the forester using the Department of Forestry's log prices and logging costs in effect at the time of default or immediately prior to resale; or shall be based upon the price bid for the timber in the resale; or shall be based on the actual value of timber removed in the resale.

(2) The purchaser shall have the following options for settlement of the default:

(a) Settlement prior to resale:

(A) A purchaser may settle a default prior to the resale of the defaulted parcel by paying balances owing the state plus any other damages and expenses incurred by the state as a result of the default;

(B) Damages and expenses shall include, but not be limited to, any estimated costs and losses resulting from resale of the parcel and any estimated rehabilitation or regeneration delay costs and losses in areas which have been harvested.

(b) Settlement after resale:

(A) Cash Resale. The purchaser shall be responsible for any monies due the state if the balance of payments owing and other damages and expenses incurred as a result of the default are not offset by the values of the resale on a cash basis. Such balances shall be due 30 days after the date of billing by State. If payment is not made within 30 days, it shall be subject to an interest charge starting from the date of billing until full payment is received;

(B) Recovery Resale. The purchaser shall be responsible for any monies due the State if the balance of payments owing and other damages and expenses incurred as a result of the default are not offset by the values in the new sale on a recovery basis. The purchaser shall have the option of settling with the state based upon the resale bid and the state's estimate of volume and value to be recovered. If this option is not exercised within 30 days of the date of billing by state, then payment shall be subject to an interest charge starting from the date of billing until full payment is received, or from the date of original billing if non-payment is the cause of default;

(C) Settlement after completion of recovery resale. The purchaser has the option of waiting until the actual volume and value has been determined upon completion of a recovery resale before making a settlement. However, the purchaser shall be required to pay an interest charge on the actual value of the completed sale from the date of the original billing until full payment is received, or from the date of original billing if non-payment is the cause of default.

(c) Without Resale. In the event a defaulted sale is offered for resale but does not sell, or if the forester determines a defaulted sale is not resaleable, the difference between the appraised price (including estimated bid-up) of the sale at time of default and the original bid price, plus any damages and expenses and interest due, shall become the basis for settlement of the defaulted contract. Payments shall be due within 30 days after the billing by State. If payment is not made within 30 days, it shall be subject to an interest charge from the date of billing. Examples of situations in which sales may not be resaleable would include, but not be limited to the following:

(A) The resale of remaining timber must be added to another sale to make it resaleable so that the original sale loses its identity;

(B) Anticipated revenue from the resale would be less than the cost of making the sale;

(C) There is no market for the remaining timber;

(D) The resale would not be scheduled within two years from date of default;

(E) Environmental restrictions prohibit resale;

(F) The defaulted sale area is included in exchange plans.

(3) In the event of default because of the purchaser's injury to or severance of timber not included in the sale, the forester may terminate the contract and/or assess damages and expenses in the amount of:

(a) Treble the market value of the severed or injured timber if the purchaser's action is wilful or intentional; or

(b) Double the market value of the severed or injured timber if the purchaser's action is not wilful or intentional.

(4) Any damages assessed for injury or severance are in addition to and not in lieu of any damages to which the forester may be entitled under section(1) of this rule.

If the Forester determines a contract is in default, the following provisions apply to all defaults governed by OAR 629-032-0000 through 629-032-0050:

(1) The following shall be retained by the forester or maintained in full effect until contract damages have been determined by agreement, mediation or litigation and the forester has been reimbursed in full for said damages:

(a) Payments made by the purchaser, including initial deposits and advance payments; and

(b) Performance and payment bonds. Performance and payment bond amounts shall not be reduced until the forester has been reimbursed in full for all contract damages.

(2) The Department of Forestry may offer the defaulted parcel for resale at any time after the Notice of Default has been mailed to the purchaser.

(3) The Department of Forestry may retain resale revenues obtained from the resale of the defaulted parcel.

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